Kweku Adoboli, the former
UBS trader who racked up
losses of $2.3 billion has not
only been jailed for seven years
but is currently fighting extradition, despite having lived in the
UK for 24 years. Tom Hayes, an
ex-UBS trader found guilty of
fiddling Libor has also been sentenced to 14 years in jail.

Now, while there is a divide
between criminal and civil law
and between prudential and
conduct regulation, there are
already very real consequences
for those who break the rules.

Would having an “
independent” enforcement body with
another big stick make any difference? I don’t believe it would.
Nor does the FCA.

In a statement, the regulator
said: ““Much has already changed
since the period considered in
the HBOS report with the FCA
learning valuable lessons from its
predecessor including changing a
number of its processes.

“As we have previously stated
the ultimate responsibility for the
failure of HBOS rests with the
Board and senior management.

They failed to set an appropriatestrategy for the firm’s businessand failed to challenge a flawedbusiness model which placedinappropriate reliance on contin-uous growth without due regardto risks involved. In addition,flaws in the FSA’s supervisoryapproach meant it did not appre-ciate the full extent of the risksHBOS was running and was notin a position to intervene beforeit was too late.

“The FCA and the Prudential
Regulation Authority (PRA)
decided to start investigations
into certain former HBOS senior
managers and those investigations
are continuing.” The FCA said it
now intends to further consider
the TSC’s recommendations.

Consequential costs

Then there is the issue of fines.

While the big fines levied on
financial services companies
make for impressive headlines,
the money still comes from one
place – customers’ pockets.

Think of it this way. If you have
no regulation at all and firms do
what they like, the customer will
get screwed over at the point of
sale. When you have strong regulation and the regulator fines a
company for breaching the rules,
companies will increase prices to
their customers to ensure they can
offset any financial losses. So, the
latter is perhaps marginally better
than the former, but neither are
particularly palatable.

So do we need to look atanother way of funding an inde-pendent enforcement body? Andwould the British public have anappetite for that? Unlikely.

Also, what is the ultimateaim of having an independentenforcement body anyway? To

have every business playing by
the rules and “in the spirit” of
regulations? The very nature of
innovation doesn’t work like
that. Businesses build their products and services by developing
a competitive edge which utilises
loopholes and keeps to the minimum standards required.

So, even if an independent
enforcement body were to be
established, a state regulator can
never keep tabs on every individual bad practice.

The City’s largest financialinstitutions have deep pockets– far deeper than any regulator –and that means they can afford toemploy the best talent. No matterhow menacing an independentenforcement body would be,there will always be well-paid,highly-informed, individualslooking for ways to circumnavi-gate regulation. There is a wholeconsultancy industry based on itand that isn’t about to change.So, while the Treasury SelectCommittee’s suggestions areextremely well meaning, Idoubt many in the City aretrembling just yet. nn Viewpoint